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“Competitiveness” Has Nothing to Do With It

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More and more US multinationals are undertaking corporate inversions – transactions in which a large firm becomes a “nominal subsidiary” of a smaller foreign company in a tax-friendly jurisdiction. Generally, companies structure such deals so that they can shelter income in a low-tax country. American corporations claim that these transactions are necessary if they are to remain globally competitive in a high US tax environment, but such assertions are “almost entirely fact free,” according to professor Edward D. Kleinbard. His rigorous examination of often-tedious tax rules contrasts with his fiery debunking of corporate complaints. getAbstract recommends Kleinbard’s intriguing, lively take on a timely topic – particularly as the White House moves to curtail inversions – to CEOs, legislators, and others with an interest in reforming the US corporate tax code and keeping American tax dollars in the United States.

In this summary, you will learn

Why US multinationals carry out corporate inversions,

Why corporate claims that high US taxes drive them to inversions reportedly ring false, and

How legislators can impede corporate inversions and bring tax revenue back to the United States.

About the Author

Edward D. Kleinbard is a professor of law and business at the USC Gould School of Law.

Summary

Why Inversions Take Place In a corporate inversion, a large company acquires a smaller, publicly held foreign company that is based in a tax-friendly nation. This practice has become popular among large American companies. The US firm structures the deal so that it becomes a “nominal subsidiary...